MUMBAI, March 1 (Reuters) - Indian government bonds fell to
three-week lows on Friday, extending losses a day after the
finance minister unveiled a higher-than-expected gross borrowing
for 2013/14, with comments from a rating agency adding to fears
that a downgrade possibility was still real.

Yields have risen 11 basis points (bps) since the government
said it plans to borrow 6.29 trillion rupees ($116 billion) in
the fiscal year starting April, higher than the 5.58 trillion
rupees for the current fiscal year.

The government has subsequently tried to assuage fears, with
sources telling Reuters that the bond buyback of 500 billion
rupees will not be included in the borrowing calendar and to
that effect the gross borrowing is 5.79 trillion rupees.

The jitters over the borrowing numbers wiped out earlier
gains after economic growth data showed December quarter GDP
eased to 4.5 percent, a worse-than-expected reading.

"The key driver has been the announcement of higher gross
borrowing than expected in the budget. This has been due to the
buyback of 500 billion rupees and the associated uncertainty on
when and how it's going to be funded," said Arvind Chari, fund
manager at Quantum Asset Management.

The losses were accentuated by comments from a Fitch analyst
that a rating downgrade possibility was still very real.

"The reality is it (credit rating) is on negative outlook -
so that bias suggests it's more than likely we will downgrade -
that says it all," Art Woo, director, sovereign ratings at Fitch
Ratings told CNBC Asia.

The comments added to the selloff despite Fitch earlier
saying the budget would not impact India's ratings.

Dealers also said the bond market was concerned that the
government would buy back shorter paper and sell longer papers.

The benchmark 10-year bond yield ended 4 bps
higher at 7.91 percent. It rose to 7.92 percent in session, a
level last seen on Feb. 6.

It fell to 7.84 percent early in the session following the
GDP data, released post-trading hours on Thursday.

Yields rose 11 bps in the week, their biggest weekly rise in
nearly seven months and snapping three weeks of falls.

The RBI bought 96.79 billion rupees of bonds via open market
operations, out of the 100 billion rupees scheduled.

Interest rate swaps were ranged, with the five-year OIS
flat at 7.22 percent, while the near-end one-year
OIS was down 1 bp at 7.61 percent.
(Editing by Prateek Chatterjee)